Beaton v McDivitt

[1988] HCATrans 78

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sl17 of 1987

B e t w e e n -

JOHN ALEX BEATON

Applicant

and

LEONARD PAUL McDIVITT and

JEAN GWENDOLINE McDIVITT

Respondents

Application for special leave

to appeal

MASON CJ

WILSON J

BRENNAN J

Beaton

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 22 APRIL 1988, AT 9.34 AM

Copyright in the High Court of Australia

SlTl/1/RB 1 22/4/88

MR B. GROSS, QC:  MBy it please the Court, I appear with

MR P. DEAKIN for the applicant. (instructed by

I.M. Genge)

MR R.P. MEAGHER, QC:  In this matter, I appear with my learned

friend, MR P. BRERETON, for the respondent. (instructed

by E.R. Stack & Sons)

MASON CJ:  Mr Gross.

MR GROSS: May it please Your Honours, in this case we assert

that the judgment in the court below presents conspicuous errors on the part of both of the majority judges which require correction to do justice

betweem the parties to the suit. We secondly assert that there is a public interest in the clarification of the law which correction of some of the errors

made by the majority judges will entail.

Your Honours, there was little dispute about

the central facts and as His Honour the president

said at page 54:

The dispute has concerned the legal

classification of those facts.

Your Honours, the case presents problems which are

of general importance and do not merely arise out of

special or particular facts of the case. The case

also presents, in our submission, the unsatisfactory

situation that on none of the points upon which the

plaintiff lost in the court below was there agreement

with any of the other judges. In short, only one

judge on each particular point made the relevant

finding adverse to the plaintiff, but there was no

agreement in that point by any of the other judges.

The learned president found there was no

consideration for the contract. Mr Justice Mahoney

who was also in the majority and Mr Justice McHugh who was dissenting found executed consideration on

Mr Justice Young had found consideration ex post	the basis of an_ exchange of a promise for an act.
facto in a fashion that was not adopted by the
Court of Appeal judges.

The learned president also found, and he was

alone in this, that there was no intention to enter

into legal relations.	Mr Justice Mahoney in the
majority expressly found there was.	Mr Justice McHugh

plainly proceeded on the basis there was for he found

a contract.

On the issue of frustration Mr Justice Mahoney

found frustration of the contract by effluxion of time.

The learned president did not deal with the question.

Mr Justice McHugh, dissenting, found that there was no

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frustration of the contract and relied on the concept

that frustration which was self induced could not

occur where the defendants failed in their duty to

co-operate. His Honour also differed from His Honour

Mr Justice Mahoney in finding that future

subdivision as distinct from rezoning was the relevant
future fact for the purpose of determining the operation

of frustration doctrine, and that subdivision was not,

at the stage of determination, impossible.

Your Honours, at first instance before His Honour

Mr Justice Young the case was framed as one for

proprietary estoppel. His Honour found that analysis

was not appropriate. In the Court of Appeal the point

was abandoned and in the light of that abandonment of

the point there - we did not appear below - and I

think for other reasons, we would not be seeking to

press that aspect of the matter on the Court if leave

is granted.

We also appreciate that this Court has very

recently in WALTON STORES V MAHER dealt with the

question of promissory estoppel. That decision now

is reported, I think.

We contend that the rights of the plaintiff

arise solely from an enforceable contract between the

parties. Your Honours, might I turn to the question

of the formation of the contract. His Honour

Mr Justice Young found that there was a contract.

Mr Justice Mahoney, at 76, found - - -

MASON CJ:  You have a finding in your favour on the issue of

contract, have you not?

MR GROSS:  We have the learned president finding no contract -

and he was one of the judges in the majority,

Mr Justice Mahoney finds a contract but disallows the

appeal on the different basis in relation to

frustration, so although we have two judges on that

point, one is a dissenting judge and one is a majority

judge, so there is no benefit to the plaintiff in

relation to that number of - - -

MASON CJ:	It is no benefit to you, but you have a majority in the Court of Appeal in your favour on the issue of
contract.
MR GROSS:	Yes, Your Honour.
MASON CJ:	So your real difficulty comes with the adverse

finding in terms of frustration.

MR GROSS:  That is the difficulty in substance, yes, Your Honour,

but may I put this in relation to the findings by the

learned president in relation to contract. In our

submission, in about six areas His Honour has stated

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principles in relation to the law of consideration which represent not merely error in the context of

this case but a fertile source of error in later

cases.

MASON CJ:  But on the issue of contract he is dissenting, so

presumably no one was going to take any notice of

what His Honour said.

MR GROSS:  It would only be important for the purpose of

determining whether the law needs to be clarified by reason of that being the majority judgment. Might I

turn to the question of frustration?

MASON CJ:	Yes.
MR GROSS:	His Honour Mr Justice Mahoney proceeded on three

bases which, in our submission, represent error: the

first_ basis. is, as His Honour Mr Justice McHugh points

out in his dissenting judgment, His Honour

Mr Justice Mahoney made rezoning rather than subdivision

the relevant fact. Second, His Honour took a different

approach to Mr Justice McHugh on the question of self

induced frustration. In our submission, the difference

of approach is not merely of critical importance to the

case but reveals a difficulty in relation to that

concept that does require a clarification.

Mr Justice Mahoney, at 82 line 5 and just a bit

before that:

I do not think that the contemplation of

the contract was that the defendants should

produce a rezoning: the contract

I am reading now at line 2 -

was upon the basis of a rezoning resulting,

not from the efforts of the defendants but

otherwise.	The defendants were, in my opinion,
under no -

obligation -

to procure it and the imposition of a term

upon them that they should seek so to do
would be wrong.

Your Honour, might I have Your Honours' assistance and

belatedly hand up photostat written materials upon

which we rely. There are four copies there.

MASON CJ: Yes. Now, just stopping there, the passage that you

have quoted indicates that His Honour was founding his

conclusion in relation to frustration on a view of the

particular contract.

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MR GROSS:  Yes, Your Honour, he was dealing with the particular

contract but the test which he applied was the question of whether they were under an obligation to procure the

act of another person, that is the council, and

His Honour also proceeded on the basis that it was a

question of whether one imposes a term upon them that

they should seek so to do. The approach of His Honour

Mr Justice Mc Hugh is different, in our submission, in

a significant respect. Under the heading, "The duty to

co-operate", at page 98 line 10 and following, His Honour

deals with the question and His Honour formulated the

duty this way:

The McDivitts have a contractual duty to do

everything necessary on their part to enable

the plaintiff to have the benefit of the

contract.

His Honour then proceeds to say:

Accordingly, it is and was their duty to do

everything in their power necessary to have

the land subdivided so as to transfer "Lot B"

to the plaintiff. No doubt it was not a

breach of that duty for McDivitts to wait

and see whether the land would be rezoned.

But if the land is not to be rezoned, then

the fulfillment of the McDivitt's duty requires

that they make an application under the

present zoning. If that application fails and if it appea•rs that there is no prospect in the foreseeable future of a subdivision being

carried through, then it may be proper to conclude

that the contract between the parties has been frustrated. But in my opinion that moment has

not yet been reached.

Now, the differing approaches, in our submission, raise the question as to what is a sufficient act or default for the purpose of preventing frustration from operating

by reason of non-co-operation by the other party.	And,
Your Honours - - -

BRENNAN J:  I do not follow that submission, Mr Gross. The

question is what - did you say?

MR GROSS:  The question is the nature of the act or default, in

this case on the part of the defendants, which will

preclude that party relying on frustration because of the failure in what is described as being the duty to co-operate. Could I put it this way, by reference to

perhaps some of the materials that have now been

handed to Your Honours, Greig and Davis, The Law of

Contract, ~987 ,. page 1320, which is at the very back of the

bundle, say this, and it is a short matter.	Under the
heading, "Impossibility caused by negligence":

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Whether one party's negligence in bringing

about an event which renders further performance

impossible will prevent him from relying on

frustration has not been the subject of

decision in the connnon law world.

Now, might I then turn to the next reference which is

Anson's - - -

WILSON J:	I am sorry, Mr Gross, what was the negligence in question here that attracts that passage?
MR GROSS:	Your Honour, I appreciate the difficulty in

formulating whether or not there is negligence in this

situation where if there is no contractual obligation

to act one has to find some impermissible failure by

the promisor to act but the case highlights, in our submission, the problem of what degree of inertia or

inactivity on the part of a promisor will amount to

a relevant failure to co-operate when in fact it is contemplated by both parties that at the end of the

transaction the promisee will have a particular benefit.

Now, perhaps the next reference I will take

Your Honours to - there are only three references

altogether - will clarify the point more clearly.

In Anson, Law of Contract, 1984, page 459, which is

the next lot of materials, at the bottom of page 459

once again under the heading of "Self-induced

Frustration", the_last three lines:

The rule, however, is not altogether clear when

such an act was inadvertent, and merely

negligent. Although there have been frequent

statements to the effect that the frustrating

event must occur without the 'default' of

either party, this point has never been
expressly decided.

So, in other words, we are moving not merely to negligence which, I appreciate, is a difficult concept

The precise nature of the obligation to act is taken	in this context but to the question of inadvertence.
up a bit more clearly, if I may suggest, in the next
document which is a case connnent which summarizes the
point quite neatly, in our submission, Professor Speidel's
connnent under the heading "The Failure to Act Where
There Is No Promise to Act", this coming from Studies
in Contract Law by Professor Murphy and
Professor Speidel, and it is a short point. Your Honours,
at the bottom of page 1120:

The ultimate question in this "borderland"

inquiry, is this:  To what extent in a bargain

do the parties have a duty in either Contract

or Tort to take affirmative action to cooperate

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with or to "rescue" the other when such

action has not been promised? Is there such

a duty? If so, when should it be satisfied

and what are the consequences of failure? To

date, the nose of the "good samaritan" camel

has not appeared in the contract tent, although

its hot breath can be felt on the side.

MASON CJ: It seems a good reason for repelling this case

altogether.

MR GROSS:	Your Honour, the animal analogy aside, the issue in our submission is that the cases do not clarify
the consequences for the failure to act, that is
inactivity, where there is no promise as such to act.
What steps must the promisor take which are necessary to enable the plaintiff in this case to have the
benefit of the contract.  Now, true it is in this
case it involves putting in trail an event which is not wholly within the power of the defendants to deliver
upon. But, in our submission, the alternative
descriptions of the duty by Mr Justice McHugh and what
can be inferred to be the analysis by His Honour
Mr Justice Mahoney highlights the problem in a fairly clear way, in our submission.

BRENNAN J: Highlights it or makes it almost impossible to

propound a solution which is based upon an agreed

substratum of fact?

MR GROSS: Well, Your Honour, in our submission it is a simple

fact situation. It is by reason of its nature a

cormnonly recurring type so that in our submission the

difficulties of legal analysis are not enhanced by

this particular set of facts and -

BRENNAN J:  What is the fact upon which, if leave to appeal

were granted, we should proceed to resolve the legal

propositions that you have been drawing our attention to?

MR GROSS:	On the question of whether or not -
BRENNAN J: And what is the fact in this case? What is the fact

in this case upon which we should be proceeding if we

were to entertain an appeal?

MR GROSS:  That McDivitts - in the context of this particular

case - left it entirely to the council of its own

motion and without any initiating step on McDivvitt's

part either to change the zoning in accordance with

Mr Justice Mahoney's analysis, or else to effect a

subdivision which would thereby enable the plaintiff

to have the ultimate benefit of the contract fulfilled,

that is - - -

BRENNAN J:  What is the substratum of fact so far as the duty of the promisor is concerned?

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MR GROSS:  It was the corrnnon understanding of both parties

that within a short span of time, by virtue of the

council rezoning the land, the plaintiff having come

on to the property and worked the property, would

then become the owner in fee simple of the land

which he had cleared and cultivated.

BRENNAN J:  Was there or was there not any duty on the part

of the McDivitts to take any step towards achieving

a rezoning or subdivision?

MR GROSS: In our submission, once the council had itself not

acted within what was expected to be the appropriate

span of time, for example two or three years appears

to be the period, some steps to produce that result

ought to have been taken.

BRENNAN J:  What steps?

MR GROSS: Applying for subdivision.

BRENNAN J:  Now, have you a finding to that effect, that there

was that duty cast upon them by the contract?

MR GROSS:	There is no such finding.
BRENNAN J:	Then how can you raise the question of law?
MR GROSS:	Because, in our submission, it depends upon an

analysis of the facts rather than whether judges

below have attached the label "duty" to it, because

that is the very legal question. It is not a factual

matter upon which a finding is required and of course
this is in the context of the case where one of the
majority judges did not even consider the question
of frustration and the other majority judge has dealt

with the question fairly elliptically so far as the

operation of legal principle is concerned and so far

as the underlying facts are concerned.

WILSON J: But it is rather a strained basis on which to impute

a positive obligation to the McDivitts, is it not,

Mr Gross?

MR GROSS: In our submission, not.

WILSON J:  I mean part of the difficulty probably focuses on

the question of the contract itself and although, as

the Chief Justice has pointed out, you happen to have,

if you cast around, two judges who have said there is
a contract, if leave were granted and you were to

succeed on the appeal, you would of course have to

succeed in persuading the Court that there was both a

contract and that it was not frustrated, the two

issues, and on the question of contract could I just

ask you this: what part, if any, does detriment play?

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If one were to take the view that there was no

detriment to your client in this case, what relevance

would that have to the question of whether there was

a contract?

MR GROSS: Your Honour - - -

WILSON J:  I have probably distracted you from what you were

saying, but I have been waiting for an opportunity

to ask it because it is troubling me.

MR GROSS:  In our submission, the question of consideration and

its value is determined by the parties in their
bargain, not by the court, and His Honour the learned
president fell into the error of doing it the other
way around. Of course, it is only necessary that there
be, in our submission, either a benefit to the promisor
or a detriment to the promisee, and His Honour the

learned president required both in exchange and

thereby applied an incorrect test.

WILSON J: Is there either, on the facts of this case?

MR GROSS:	Yes, in our submission, because the promisor got the benefit of having a section of his land worked
by a person who would apply those principles of
agriculture which he held dear and, in addition, he
would have a person there who was prepared to assume
the burden of extra rates that would become payable upon any subdivision of the land. That benefit to the
promisor was a real one.  The detriment to the - - -

WILSON J: Just pausing there a moment, the benefit then was

that by giving the land away he would be relieved of

rates on the land.

MR GROSS:  And in addition there was a special method of

agriculture which was -

W"ILSON J:  The science of permaculture would be advanced, but

without anything other than intellectual satisfaction

to the donor.

MR GROSS:  Yes, and bearing in mind he himself intended to

set up a nursery so plainly within the total 25 acres

you would have not merely one but two agricultural

enterprises.

WILSON J:	I see.
MR GROSS:	But the important thing about the benefit, in our submission, was he got the benefit of having his
request complied with and, in our submission, in cases where you have an act in return for a promise, the cases, in particular the AUSTRALIAN WOOLLEN MILLS' case,
makes it quite clear that the fact that this is done by
virtue of a request is most important and in our

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submission that has to be taken into account in

determining whether there is a benefit to the promisor.

I think Professor Stoljar in the article that has been

handed up to Your Honours deals with the consideration

of request, and without going through that particular

article at all - - -

WILSON J: That might require one to explore the difference

between a request and acquiescence.

MR GROSS:	Yes, but Your Honour, the mere fact of having the request complied with - that is an act in return for a
promise - was a sufficient benefit in any event. Another
thing that the president did, in our submission, was to devalue the benefit by determining whether there
was a benefit in net terms and whether it was
counterbalanced or outweighed to a significant extent by the various benefits being derived under the
transaction by the plaintiff promisee. But,
Your Honours, I appreciate, particularly Your Honour
the Chief Justice, that you do not want me to go in detail to our submissions on contract, but there
are these errors and we would certainly wish to address
substantial argument to the question of whether there
was a contract.

WILSON J: Yes, thank you.

MR GROSS:  Your Honours, I think that completes my submissions,

unless there was some further matter.

MASON CJ: Yes, thank you, Mr Gross. The Court need not trouble

you, Mr Meagher.

In the view of the Court, the outcome of the proposed appeal in this case would depend upon the particular facts of the case and an analysis of

those facts in such a way as to produce a specific

question of law before it could be said that any

question of general principle arises. For that

reason the Court is of opinion that the case is

not a suitable vehicle for the ventilation at this
stage of a question of general principle.	The
application is therefore refused.

MR MEAGHER:	I ask for costs.
MR GROSS:	There is nothing I can say, Your Honour.
MASON CJ:	The application is refused with costs.

AT 10.03 AM THE MATTER WAS ADJOURNED SINE DIE

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